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Purchase order against invoice
A purchase order is written by the buyer, before anything is supplied, saying what they want and at what price. An invoice is written by the seller, after supply, asking to be paid. The purchase order is the commitment to buy; the invoice is the claim for money, and it usually quotes the purchase order number so the two can be matched.
Two documents, opposite directions, and the sequence is what makes them useful. Most late payments are a failure of that sequence rather than of goodwill.
Nuwan Madhusanka · Co-founder
3 min read · Published
| Purchase order | Invoice | |
|---|---|---|
| Written by | The buyer | The seller |
| Sent | Before supply | After supply |
| Says | This is what we are ordering | This is what you owe |
| Creates | A commitment to buy on those terms | A debt and, usually, a tax point |
| Matched against | The invoice and the delivery | The purchase order and the receipt |
Why buyers insist on the number
In any organisation large enough to separate ordering from paying, the purchase order is how a payment gets approved. Finance matches three things: the order, the evidence of delivery, and the invoice. An invoice with no purchase order number cannot be matched, so it does not enter the approval queue at all, and it sits unpaid while everybody assumes somebody else is dealing with it.
What a purchase order should carry
Line items with quantities and prices, a delivery window rather than a single date, the delivery address, the payment terms, and a reference the seller must quote back. Terms belong here because a purchase order that is silent on them inherits whatever the seller printed, which is how a business ends up agreeing to fourteen day terms it never approved.
Partial deliveries and changes
Real orders arrive in pieces. Decide up front whether partial delivery is acceptable and whether it can be invoiced separately, and say so on the order. If quantities or prices change, the clean path is to amend the purchase order before the invoice arrives, because an invoice that does not match the order is the single most common cause of a payment stopping dead.
Questions people ask
Is a purchase order a contract?
Once accepted by the seller, it usually forms one, on the terms it states. That is why the terms on the order matter: they are the buyer's opportunity to set the conditions rather than accept the seller's. A purchase order sent and acted on without objection is generally treated as agreed.
Can I invoice without a purchase order?
You can issue the invoice, but if your customer runs a purchase order process it will not be approved. The practical advice is to ask for the number before you start work, not after you deliver, because getting one retrospectively means somebody has to justify why the order was never raised.
What is three way matching?
Finance compares the purchase order, the goods received note or delivery evidence, and the invoice. If all three agree, payment proceeds. It exists to catch both errors and fraud, and it is why a small mismatch in quantity or price stops a payment that everyone agrees is owed.
Who sets the payment terms?
Whoever's document is agreed last, in practice. A purchase order that states terms and is accepted without objection usually governs. If both documents state different terms and nobody addresses it, that is exactly the ambiguity that surfaces sixty days later.
What is a blanket order?
A single purchase order covering repeated supply over a period, drawn down by releases rather than raised each time. It suits regular deliveries of the same thing, and it saves raising an order a week. The trade is that it needs a clear total value and an end date, or nobody can tell when it is exhausted.
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